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In a dramatic turn of events, South Korea’s declaration of martial law triggered a significant market reaction, with Bitcoin’s price plummeting by 33% on Upbit.
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This unexpected political atmosphere not only affected Bitcoin but also led to a staggering 52% drop in XRP, illustrating the volatility of crypto markets during geopolitical unrest.
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“This sudden price drop underscores how local political events can create stark discrepancies in cryptocurrency valuations,” said Bitwise Senior Investment Strategist Juan Leon.
South Korea’s martial law announcement caused Bitcoin to drop 33% on Upbit, affecting crypto markets significantly, including a 52% drop in XRP.
Martial Law Triggers Bitcoin Price Plunge on Upbit
The announcement of martial law by South Korean President Yoon Suk Yeol sent shockwaves through the crypto market, particularly on Upbit, where Bitcoin’s price witnessed a rapid decline. Falling from ₩132,429,000 to ₩88,266,000 within 30 minutes, this represented a sharp 33% decrease. Following this sharp decline, Bitcoin managed a slight recovery to ₩127,000,000 (approximately $88,600).
Ripple Effects: XRP Endures Severe Market Volatility
In parallel to Bitcoin’s drop, XRP experienced a dramatic fall on Upbit, dropping by an astonishing 52% to ₩1,623 ($1.13) before rebounding to ₩3,400 ($2.37). This volatility was compounded by a wider 6.3% discount observed on Upbit compared to other exchanges.
Increased Trading Activity Amid Political Upheaval
In the wake of the martial law announcement, trading volumes on Upbit surged by 32%, reaching $23 billion. A significant portion of this activity was attributed to XRP, which accounted for approximately $6.5 billion of the total trade volume. This spike indicates heightened trading among South Korean investors reacting to the unfolding political crisis.
The Kimchi Premium: A Historical Context
The recent events have sparked discussions about the return of the Kimchi Premium, a phenomenon where cryptocurrencies trade at higher prices on South Korean exchanges compared to their global counterparts, driven by stringent capital controls and trading behaviors. While historically this premium has created opportunities for arbitrage, the recent martial law announcement has led to its inversion, creating a situation where cryptocurrencies traded at a discount.
Impact on South Korean Won and Global Sentiment
Following the declaration, the South Korean won depreciated by nearly 3% against the U.S. dollar, reflecting the broader impact of political uncertainty. Analysts suggest that such volatility in digital assets signals a potential shift in investor confidence amid political instability. This reflects a growing need for investors to remain cautious and informed as geopolitical circumstances evolve.
Conclusion
The swift reaction of Bitcoin and XRP prices to the political instability in South Korea emphasizes the fragility of crypto markets to local events. While recoveries may occur, the risks associated with sudden geopolitical shifts cannot be overstated. Investors should closely monitor such developments to navigate the volatile landscape of cryptocurrency trading effectively.
